Planet Money

3:05 pm

Thu August 14, 2014

Should We Kill The $100 Bill?

Of all the U.S. currency in the world, nearly 80 percent is in $100 bills. That's about a trillion dollars.

Some people want to get rid of the bill altogether. Ken Rogoff, an economist at Harvard University, says the $100 bill helps criminals:

"Think about countries like Mexico, Colombia, where they're really at war with the drug money, where the United States is not only buying the drugs but it's providing this resource that very much helps the drug dealers."

Richard Stratton is a former drug smuggler who benefited from the $100 bill. In one deal, Stratton brought 15,000 pounds of hashish into the U.S. But the $50 million deal left Stratton with a problem: He had to get all that cash out of the country and into his bank accounts in the Cayman Islands. Hundreds made the job easier.

And drug dealers aren't the only ones that use $100s. Human traffickers, weapons dealers and all kinds of criminals love the bill.

But there's also a good side to the popularity of $100s. The note is popular with ordinary people around the world who can't trust their government or banks. About 20 years ago, the Federal Reserve saw vast sums of currency, especially in the form of $100 bills, leaving the country.

"At some point, Alan Greenspan said, 'So, you know, how much is it?' " says Ruth Judson, an economist at the Fed. "And people didn't know the answer. And we just thought that we should know the answer to a question like that."

Judson spent years traveling around the world with a team of Secret Service agents and Treasury officials. They tried to map where all the $100s were. She says they found that as much as two-thirds of the currency was overseas.

Today, more than half a trillion dollars' worth of $100 bills are overseas.

But Judson is not convinced that the U.S. needs to kill the $100 bill. After all her traveling and sleuthing, she says, the Fed still doesn't know how much of the money is being used for good and how much is being used for bad.

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Transcript

MELISSA BLOCK, HOST:

The United States makes a product that's beloved all over the world, it never goes out of style and makes a nice gift not many would return. It's the $100 bill. It's also used to finance a lot of illegal transactions. That's why one economist is recommending a radical move. NPR's Chris Arnold has been working with our Planet Money team and has this report.

CHRIS ARNOLD, BYLINE: Ken Rogoff has an idea - he wants to kill Benjamin Franklin. Well, not exactly - he wants to kill the $100 bill. Rogoff is a renowned Harvard economist who's published a new paper about this.

KEN ROGOFF: They do surveys and the average person reports holding a $100 bill once a year - you know, something like that.

ARNOLD: And that's why this next fact is really kind of strange. Of all the U.S. currency in the world - everything out there - at nearly 80 percent is in $100 bills. 80 percent. That's about a $1 trillion in $100 bills. Who wants big stacks of hundreds?

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UNIDENTIFIED WOMAN: A huge bust in Mexico - in fact, Mexico's president's saying it could be the biggest drug bust in the world - police finding more than $200 million.

ARNOLD: That's Fox News reporting on a drug bust a few years ago, where a small mountain of those $100 bills turned out.

UNIDENTIFIED WOMAN: Wads of U.S. cash so high it was stuffed to the ceilings - it was also in closets and bulging out of suitcases.

ROGOFF: It's basically in circulation outside the legal economy.

GREGORY WARNER, BYLINE: Ken Rogoff's been studying this for years and he thinks that having a big bill, like the $100 bill, is kind of nuts.

ROGOFF: You can carry a $1 million in a briefcase in U.S. dollars.

WARNER: And it's hard to think of many legitimate reasons for doing that, so Rogoff says that the $100 bill really helps out drug dealers and human traffickers and weapons dealers.

ROGOFF: Think about countries like Mexico, Colombia - where they're really at war with the drug money, where the United States is not only buying the drugs but it's providing this resource that very much helps the drug dealers where these governments are barely able to hold their own because there's so much money.

WARNER: OK, so we figured we should also go talk to somebody who's actually sat at a table piled high with his stash of ill-gotten $100 bills.

RICHARD STRATTON: For me, I liked it. It settled my nerves.

WARNER: Richard Stratton is a former drug smuggler.

STRATTON: You know, it was nice to sit and smoke a joint and count hundreds of thousands of dollars. It was a pleasant, relaxing experience for me.

WARNER: Stratton specialized in smuggling marijuana and hashish - did eight years in prison and now he writes about it. In one deal alone, he brought in 15,000 pounds of hash hidden inside of shipping containers packed with Middle Eastern dates, and that was only half the job. After he got through customs and dealt with all the logistics, then he had this giant pile of cash.

STRATTON: That was a $50 million deal wholesale. So I mean, we made a lot of money. And that's where it became a whole different thing - with smuggling the money out of the country.

WARNER: To Lebanon, to his accounts and the Cayman Islands - He says people work full-time for drug dealers just changing tens and twenties into hundreds, because they're much easier to smuggle. OK, but the $100 bill also makes life better for ordinary people all around the world. My colleague Robert Smith saw this in Myanmar. His translator told him, I don't trust my government, I trust in the U.S. dollar. And he showed Robert his entire life savings tucked into the pages of a book.

UNIDENTIFIED MAN: I always bring my money with me

ROBERT SMITH: And you have crisp $100 bills in here. They're perfect. They're beautiful look at this.

WARNER: Actually about 20 years ago, people at the Federal Reserve looked around and saw fast sums of currency, especially $100 bills, leaving the country.

RUTH JUDSON: At some point Alan Greenspan said, so you know, how much is it? And people didn't know the answer and we just thought that we should know the answer.

WARNER: That's Ruth Judson, an economist at the Fed. She spent years with a team a Secret Service agents and treasury officials trying to answer that question.

JUDSON: We did go to Russia, to Belarus, to Argentina - I believe we went to Peru pretty early on - Cambodia, Kazakhstan, Ukraine.

WARNER: They also took an old method used by fish biologists to tag and count fish, and they figured out how to do basically the same thing to tag and count money.

JUDSON: In the fish method, what we found was for hundreds in particular, that probably as much as two thirds was overseas.

WARNER: Today, that's more than half a trillion dollars in $100 bills alone, outside of the country. But Ruth Judson says she's not convinced that we need to kill the $100 bill. That's because for all her sleuthing, she says we still just don't know how much of the cash out there is being used for good stuff and how much is been used for bad stuff. As for our reformed hashish smuggler Richard Stratton, he thinks that criminals would probably just adjust to a world without hundreds - they'd figure something out. But that's not his problem anymore. He says he's out of the business. And his pockets are no longer stuffed with $100 bills. We checked.